Section 271(d) of the Companies Act, 2013 ("the Act") provides that a company may be wound up by the Tribunal if it has made a default in filing with the Registrar its financial statements or annual returns for the immediately preceding five consecutive financial years. The ground is objective and does not require proof of insolvency or of any other misconduct. It is a filing-compliance ground, and it is one of the few grounds that the ROC can invoke directly.
The Computation
The five-year period is the immediately preceding five consecutive financial years. The default must be continuous; a company that has filed for some of the years but not others may not satisfy the ground. The Tribunal will examine the ROC's records to determine whether the default exists.
The ground is independent of the company's financial condition. A company that is solvent but has not filed its financial statements for five years is liable to be wound up, even if it has assets that exceed its liabilities. The rationale is that a company that does not file its financial statements is not accountable to its members or to the public, and its continued existence on the register is a regulatory risk.
The Director Disqualification
The non-filing of financial statements for three consecutive financial years triggers director disqualification under Section 164(2). A director of a company that has not filed its financial statements or annual returns for three continuous financial years is disqualified from being appointed as a director in any company for five years. The disqualification is automatic, and it applies to all the directors of the defaulting company, not just the directors who were responsible for the filing.
The five-year winding-up ground and the three-year disqualification ground are related but distinct. The disqualification operates at three years; the winding-up ground operates at five years. A company that has defaulted for three years faces director disqualification even if it subsequently files the returns; a company that has defaulted for five years faces winding up.
The Practical Consequences
A company that is approaching the five-year default should take immediate steps to file the outstanding returns and to regularise its compliance. The ROC may file a winding-up petition if the default continues, and the directors may be disqualified. The company may also be struck off under Section 248 if it is defunct, but strike-off is not available where the company has liabilities or ongoing proceedings.
The five-year rule is a reminder that corporate compliance is not optional. A company that neglects its filings can be wound up even if it has no creditors and no disputes.
Call to Action
Anuj Desai & Associates advises companies and directors on the five-year non-filing ground—from the regularisation of outstanding filings and the director disqualification analysis to the defence of a winding-up petition. If your company has filing defaults, we can help you regularise before the winding-up ground is triggered.
📧 office@anujdesaiassociates.com
📞 9619456656
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